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Securities Fraud Help Center - Security Arbitration

Did You Know?

Last year the Securities and Exchange Commission, other securities regulators and major U.S. securities firms reached a $1.5 billion global settlement involving the issue

Arbitration is a means of resolving disputes between parties outside of court. In binding arbitration, the parties present evidence to an arbitrator or a panel of arbitrators and agree to abide by the decision of the arbitrator(s) regarding the dispute.

Most brokerage firms have a mandatory arbitration provision included in their new account agreements. If you signed the new account agreement and do not have a defense to the enforceability of the agreement, you more than likely have to arbitrate any claims you may have arising out of the agreement. Should you file a claim in court anyway, the brokerage firm may request the court to send your case to arbitration.

Many securities fraud cases must be settled through arbitration proceedings because most investors agree in writing to handle disputes through arbitration instead of court when they first form a relationship with a brokerage firm. Investors retain rights to use the court system in some situations, but for the most part are limited to arbitration. Because arbitration proceedings are different than court proceedings, it is important to make sure that you have a securities fraud attorney negotiate your case before an arbitration panel.

The Facts on Arbitration

  • Unlike in court, arbitrations are not decided by either judges or juries.
  • The amount of pre-trial discovery of information is more limited in arbitration.
  • Arbitration proceedings are less expensive and time consuming than court proceedings.
  • Brokerage firms will always be represented by a lawyer at the hearing
  • A typical arbitration panel in a securities case will be composed of an industry arbitrator and two non-industry arbitrators
  • Brokerage firms often settle before the arbitration hearing begins.
  • The rules of evidence in arbitrations are often more relaxed than in court.
  • Arbitration panels normally include three arbitrators. Two represent the public and one represents the industry.
  • Decisions made by arbitration panels are final. This may save the investor from a lengthy and costly appeals process.
  • If a decision is made in the investor's favor, the brokerage firm has thirty days to pay what is owed.
  • In arbitration proceedings the arbitration panel holds less authority than the court in demanding documents.
  • After hearing the evidence and arguments in a case, the three arbitrators will announce their decision by filing a written award.
  • Arbitrations offer very little rights of appeal.

Securities Arbitration & Mediation

Arbitration differs from mediation in that a third party (an arbitrator) makes a decision that is final and binding on the parties.  Mediation is an attempt to bring the parties together and come to some type of agreement.  What is called "Securities Arbitration" typically deals with stockbroker fraud and abuse, or some type of wrongdoing by member firms.  

The National Association of Securities Dealers (NASD) conducts the largest alternative dispute resolution program in the area of securities law, but the stock exchanges, such as the New York Stock Exchange and the American Stock Exchange, also have arbitration programs.

Free legal information for broker disputes law @ FreeAdvice.com.CONTACT A SECURITIES FRAUD ATTORNEY IN YOUR AREA

If you have been defrauded by your broker or brokerage firm and need to pursue your legal options or if you are in need of legal advice or services, or simply wish to speak to an attorney who has successfully handled Securities Fraud Litigation in your state, you may use our Free Online Consultation Form.

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Last updated: December 10, 2007